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6060 Corp. v. Medmarc Casualty Insurance Group Company

February 19, 2013

6060 CORP.

The opinion of the court was delivered by: Legrome D. Davis, J.



This case arises from a contract dispute between insurance companies. The crux of the dispute is whether Plaintiff 6060 Corporation f/k/a Norman Spencer, Inc. ("Plaintiff" or "6060"), in assuming certain liabilities and obligations from the Administrators for the Professions of Delaware, Inc. ("AFPD"),*fn1 assumed the duty to arbitrate all disputes related to the pre-existing Program Manager's Agreement entered into between AFPD and Defendant Medmarc Insurance Company ("Defendant" or "Medmarc").

A. Program Manager's Agreement This origin of this litigation can be traced back to September 1, 2002, when Medmarc and non-party AFPD entered into a Program Managers Agreement (the "PMA"). Pursuant to the PMA, AFPD undertook responsibilities related primarily to managing Medmarc's professional liability claims. (See generally Doc No. 26, Ex. A; Ex. E; Ex. F). The PMA contains an arbitration clause, which provides that "[a]ny dispute arising out of [the PMA] shall be submitted to the decision of a board of arbitration . . ." (Doc. No. 26, Ex. A, at § 24). The PMA also contains a non-assignment provision, stating that the PMA "shall not inure to the benefit of any successor-in-interest of [AFPD], nor may [AFPD] assign any interest or obligation of [AFPD] under [the PMA] in whole or part without prior written consent of [Medmarc]." (See Doc. No. 26, Ex. A, at § 31).

B. Asset Purchase Agreement

On August 31, 2011, 6060 entered into an Asset Purchase Agreement ("APA") with AFPD whereby 6060 acquired essentially all of the assets from AFPD.*fn2 (See Doc. No. 26, Ex. B). In contrast to its large acquisition of assets, 6060 significantly limited its purchase of AFPD's liabilities and obligations. Among the limited "Assumed Liabilities" purchased by 6060 were "liabilities and obligationsarising on or following the Closing in connection with or in relation to . . . the [PMA]." (Doc. No. 26, Ex. B, at § 1.2. (emphasis added)). 6060 further limited its liability by not assuming "any obligation or liability resulting from or arising out of any default, or nonperformance by [AFPD] of any Assumed Liability prior to the Closing Date [August 31, 2011]." (Id.). Any liabilities or obligations not assumed by 6060 under the APA were to remain the sole obligation of AFPD. (Id.).

On September 2, 2011, two days after the APA became effective, Medmarc sent AFPD an email stating the following: "Thank you for advising of the change in ownership of AFPD, pursuance (sic) with the terms of our Program Manager's Agreement (PMA). Understanding terms of the PMA survive this change in ownership Medmarc offers no objection." (Doc. No. 31, Ex. C).

In August 2009, three years prior to the APA, AFPD and Medmarc terminated the PMA with respect to any new claims filed thereafter. (See Doc. No. 27, at ¶ 13). AFPD remained responsible for completing any of the limited "run-off work" related to claims filed prior to the termination agreement, meaning that AFPD was responsible for "completing whatever work . . . needed to be done that was already in the pipeline" when the agreement was terminated. (See Doc. No. 27, Ex D-2, at 66). Thus, by the August 31st closing on the APA, AFPD was responsible for only the limited amount of Medmarc business that existed prior to the PMA termination in August 2009. Following the APA, 6060 acquired that limited "run-off" business from AFPD for three months. On December 1, 2011, Medmarc reacquired responsibility for all of the "run-off" business.

C. The McCormick Claim

In March 2012, counsel for Medmarc sought indemnity against both AFPD and 6060 for a professional liability claim known as the "McCormick Claim." The McCormick Claim refers to an insurance claim filed by a Florida law firm in March 2006. The law firm filed the claim after a malpractice lawsuit had been brought against it (the "McCormick Action"). (Doc. No. 31, Ex. F, at ¶ 13). The McCormick Action eventually went to trial in November 2011, and in March 2012, a judgment was issued against the law firm in excess of five (5) million dollars.

According to Medmarc, it did not become aware of the McCormick trial until it received a copy of the judgment from the law firm's independent counsel in March 2012, seeking coverage for the judgment. (Doc. No. 31, Ex. F, at ¶ 38). On March 28, 2012, Medmarc sought indemnity from AFPD under the terms of the PMA "for all liability, loss, damage, or expense as a result of the acts and omissions of AFPD in its claim management and servicing of the McCormick Action." (Id. at ¶ 39). That same day, Medmarc simultaneously made a claim for indemnity under the terms of the PMA against 6060 for its handling of the McCormick Action.

AFPD and 6060 both refused Medmarc's demand for indemnification. As a result, Medmarc paid for and posted an appeal bond for the McCormick judgment. Thereafter, on June 11, 2012, Medmarc sent AFPD and 6060 a Demand for Arbitration under the PMA, indicating its intent to resolve all disputes related to the McCormick Claim through arbitration.*fn3 (See Doc. No. 26, Ex. E). In response, 6060 filed the instant Complaint, seeking a declaratory judgment that it is not obligated to arbitrate any dispute with Medmarc under the PMA or otherwise, and to enjoin Medmarc from seeking to pursue any claim against 6060 in arbitration or forcing 6060 participate in any arbitration. (See Doc. No. 1, at 6).

The day after it filed its Complaint, 6060 filed a motion for summary judgment, alleging that this case could be resolved solely upon the language of the relevant contract provisions. Medmarc opposed the motion and simultaneously cross-moved for summary judgment in its favor. Despite its concession that the summary judgment motions were ripe for disposition, Medmarc nonetheless urged that this Court to postpone resolving the dispositive motions until after discovery. Following a conference with all parties, we denied the motions for summary judgment as premature without prejudice, and ...

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